Walter Energy Buys Western Coal: 'The Right Transaction at the Right Time'

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Includes: WLT, WTNCF
by: Proactive Investor

Walter Energy (NYSE: WLT) said on Friday that it will acquire the Vancouver-based Western Coal (OTC:WTNCF) in a deal that values Western Coal at roughly C$3.3 billion. In exchange for each Western Coal share, Walter Energy will pay C$11.50 per share in cash or 0.114 of a Walter Energy share, at the choice of Western Coal’s shareholders.

The C$11.50 offer represents a 56% premium to Western Coal's closing share price of on Nov. 17, the day before offer was announced.

"This is a transformative transaction at a time when global demand for metallurgical coal is surging," said Joe Leonard, interim chief executive officer of Walter Energy.

He added, “Our combined production capacity and geographic footprint leaves us extremely well positioned to benefit from favorable sector dynamics driven by increased steel production in markets such as China, India and Brazil. Bottom line, this is the right transaction at the right time.”

If the deal closes, the combined company would have roughly 385 million tons of coal reserves.

The deal, which has been approved by both company’s boards, is expected to be accretive to Walter Energy's earnings per share in the first full year after the deal closes. The deal, subject to approval by Western Coal’s shareholders and other customary closing conditions, is expected to close by the second quarter of 2011.

After the deal closes, three directors nominated by Western Coal’s board will join the board of Walter Energy.
Walter Energy also said Friday it will apply for a listing on the Toronto Stock Exchange.

Since the announcement, Western Coal has rallied almost 12% to trade Friday at C$11.54 while Walter Energy’s shares have moved up 3.5% to trade at US$109.24 an hour before market close.